Snarky Behavior

Entries tagged as ‘economics’

Make it Rain!

March 7, 2008 · 1 Comment

fat joe

So it looks like our country is facing a liquidity trap.  Not enough money to go around, banks won’t lend anyway because they’re writing off their losses, and there’s no way to introduce more money without causing inflation.

Milton Friedman’s answer to the liquidity trap was to bypass financial intermediaries and give money directly to consumers– a so-called “helicopter drop”.

I’m all for this.  Let’s replace Ben Bernake with Fat Joe and fly around Manhattan dropping dollars.  It’s more fun than getting a check from the IRS, and think of all of the excitement it will generate!  It’s like being in the money machine.

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Why is Tide the most expensive detergent? Is it worth it?

January 26, 2008 · 6 Comments

Waiting for the South Carolina results to come in, I am struck by how silly some of the pundit analysis comes across when dissecting voter preferences. 

Now that the field has been whittled down to two front-runners for each party, we are left with narrowly defined either/or considerations to explain the “rational choice” between Candidate A and Candidate B.  This reductive analysis seeks to find justifications for expressing preference between two similarly marketed products (i.e. Pepsi v. Coke). 

In fact, I just heard Keith Olberman refer to the “Clinton brand” as a potential panacea to the economic anxiety many voters are now experiencing.  Buying the Clinton “brand” thereby reinforces the voters’ self-image as someone whose primary concern for the future is economic security.

When people approach an election the same way they approach a consumer choice, it’s destructive to democracy.  It reduces the candidates, it atomizes the electorate, and it biases our “rational choice.”

But that’s neither here nor there… back to the question at hand.     

I ran across a conversation at Marginal Revolution asking the question:  Why is Tide so Popular? 

I thought… no really, why is Tide so popular?  Why do I buy Tide instead of Gain, which is cheaper?  What does Tide say about me, as a person? 

It’s more expensive, so I presume it’s the highest quality product.  I like to think that I can afford the highest quality, because I’d prefer that my clothes be as soft and clean and fresh as possible. 

But is that a reasonable assumption?  What if Proctor and Gamble just spends more on branding/marketing?  What if all laundry detergents are essentially the same mix of chemicals, with different bells and whistles? 

Well, here’s the breakdown, from the comments section.  VERY interesting stuff:

As a former market research service provider a Home and Beauty Care company most often butting heads with P&G in the Laundry Category, I have a lot of perspective on it based off findings. And bear with me, when it comes to market research I have pretty robust information:

* Echoing the sentiments and actual reports above of many, P&G detergents typically perform better in terms of both cleaning and the conditioning of clothing. Granted, we now wash clothes in modern america not to clean them per se, but to “refresh them”.

* The “mere refresh” needs as opposed to “Deep cleaning” being a priority opens the door for price segments in lower tiers for consumners: A&H, Xtra, Purex, Store Brands that do significant volume, even if dollars are more modest. Testimony to this is P&G has a 55-60% share of sales dollars, but a 40-45% volume share of sales since its products are premium largely.

* P&G manages their Fabric Cleaners, Conditioners (By the way, Downey is their brand and is by far number one conditioner), and Dryer Sheets (By the way, Bounce/Downey is the number one/two brand by far there too) as a massive portfolio, with each targeting certain segments:

** Tide is the best performer, most expensive, most high end benefits included.

** Gain is the experiential and frgrance brand, and has strong ethnic performance: quality and an experience. BTW, it challenges for status of 2nd biggest brand itself.

** Cheer is a the Color-Safe premium brand

** Dreft is the Baby, non-irritating brand

** ERA is the Budget Brand to compete in that segment

* Consumer segmentation studies and a Decision Trees suggests that with Laundry category the first decision is whether you are a Tide customer or not. Then, if not, you typically believe “All are the same”/”I am poor” and your decision is based on price. This harms mid-level brands such as ALL or Wisk that try and have a hybrid of some quality and innovation, but competitive mid-level pricing.

* Consumers pay more and get excited over high order benefits that Tide is a leader in providing new versions of on a yearly basis. What are those? High Efficiency, With Touch of Downey, With Bleach Alternative, With Color Protector, Free & Clear, Cold Wash, Scented, Various Sizes, etc. By the way, when you bu yany of these, note the number of loads per bottle changes (lower), even if bottle is same size. that’s their marging boosting! Only ALL sometimes comes out with benefits such as these first. (Small and mighty, anti-allergen)

* Shelf-Sets and sales are dictated by P&G due to their demanding share. If shelves were organized by TYPE rather than BRAND, it would help smaller brands and change consumer mentality about choice of product. Scented onlyt first, then High efficiencies, THEN with Bleaches, etc. Insrtead, you have the ubiquitous wall of orange taking up the whole section.

* Also, P&G’s budget for discounts and specials is much larger, as well as tie-ins with its other leading brands Febreze, Downey, and Bounce that synergistically boost each other.

This all said, the biggest challenge for Tide and P&G go-forward is the changing face of the US consumer (Hispanic, etc.), the rising costs of raw materials (partial petroleum basis for liquid detergents), sales rise only as population does (no new markets or consumers), quality ceasing to be a key differentiator.

People alluded to Heinz’s dominance as well – there are small chips in the facade, they always must remain vigilant. Remember, Heinz doesn’t compete with Ketchup only – it competes with all condiments. mayo, Vinegar, Ranch, Mustard…Staying relevant is important.

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An Impulse I Never Understood:

January 10, 2008 · Leave a Comment

The call by Ron Paul and other Libertarians to “abolish the US Department of Education” and return the control of educational decisions to the local level, based on the 10th amendment.

(Granted I am biased, because I have worked in some capacity for the US Department of Education.  But I worked in the non-controversial branch — that is to say statistical data collection and analysis — not policy regulation and funding.)

I realize that we are a country founded on frontier schoolhouses and homeschooling.  But that tradition seems pretty antiquated in a modern, global context. 

Yes a more heterogeneous system may result in a healthier diversity, which is key to the concept of creative destruction and innovation in particular. 

But when we are competing against ethnically homogenous nations like China, Singapore, Japan, and to some degree India and most of Europe– and many of those countries have centrally planned educational systems resulting in a relative and absolute advantage in the percentage and number of highly-educated students… we lose.

The ironic take on this position is that Friedrich Hayek, one of the founding members of the Austrian School of economics that largely informs the libertarian position, observed that one of the results of the capitalist system and the labor specialization it entails is that as our society progresses technologically, the potential of any individual to retain a relative share of the totality of human knowledge must decrease. 

It therefore follows that the homeschooling impulse is misguided because unless a parent is a mental giant, his or her likilhood to better educate his or her children than might a trained, professional teacher, is extremely small. 

And it is national standards and accountability norms that result in highly trained professional teachers.  Federal standards raise the bar of what we expect our teachers to teach, and our children to know.  It’s really not that hard. 

The debate should be over where and how we set the bar, not whether it should be there at all. 

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Dropping Knowledge: On Guilty Liberals

December 9, 2007 · Leave a Comment

I found this gem while researching my paper on Globalization.  From “In Defense of Globalization,” by Jagdish Bhagwati:

I also think that an altogether new factor on the scene that
propels the young into anti-capitalist attitudes comes from a different,
technological source in a rather curious fashion. This is the dissonance
that now exists between empathy for others elsewhere for their misery
and the inadequate intellectual grasp of what can be done to ameliorate
that distress. The resulting tension spills over into unhappiness with the
capitalist system (in varying forms) within which they live and hence
anger at it for its apparent callousness.


Today, thanks to television, we have what I call the paradox of inversion
of the philosopher David Hume’s concentric circles of reducing
loyalty and empathy. Each of us feels diminishing empathy as we go from
our nuclear family to the extended family, to our local community, to
our state or county (say, Lancashire or Louisiana), to our nation, to our
geographical region (say, Europe or the Americas), and then to the world.
This idea of concentric circles of empathy can be traced back to the Stoics’
doctrine of oikeiosis—that human affection radiates outward from
oneself, diminishing as distance grows from oneself and increasing as
proximity increases to oneself. In the same vein, Hume famously argued
that “it is not contrary to reason to prefer the destruction of the whole
world to the scratching of my finger” and that “sympathy with persons
remote from us is much fainter than with persons near and contiguous.”

What the Internet and CNN have done is to take Hume’s outermost
circle and turn it into the innermost. No longer can we snore while the
other half of humanity suffers plague and pestilence and the continuing
misery of extreme poverty. Television has disturbed our sleep, perhaps
short of a fitful fever but certainly arousing our finest instincts.  Indeed,
this is what the Stoics, chiefly Hierocles, having observed the concentric
circles of vanishing empathy, had urged by way of morality: that “it is the
task of a well tempered man, in his proper treatment of each group, to
draw circles together somehow towards the centre, and to keep zealously
transferring those from the enclosing circles into the enclosed ones.”

At the same time, the technology of the Internet and CNN, as Robert
Putnam has told us, has accelerated our move to “bowling alone,”
gluing us to our TV sets and shifting us steadily out of civic participation,
so that the innermost circle has become the outermost one.
So the young see and are anguished by the poverty and the civil wars
and the famines in remote areas of the world but often have no intellectual
training to cope with their anguish and follow it through rationally
in terms of appropriate action.

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How Can We Raise Awareness in Darfur on How Much We’re Doing for Them?

December 5, 2007 · Leave a Comment

This video from The Onion is tongue and cheek, obviously, but like any good satire, it exposes an important truth.

As William Easterly argues:

The obsessive and almost exclusive Western focus on them is less relevant to the vast majority of Africans — the hundreds of millions not fleeing from homicidal minors, not HIV-positive, not starving to death, and not helpless wards waiting for actors and rock stars to rescue them… Economic development in Africa will depend — as it has elsewhere and throughout the history of the modern world — on the success of private-sector entrepreneurs, social entrepreneurs and African political reformers. It will not depend on the activities of patronizing, bureaucratic, unaccountable and poorly informed outsiders.

Conservatives tend to get a bum rap for being heartless, utilitarian, and unsympathetic to the plights of others. But Easterly has a point: as long as the West focuses on Africa’s deficiencies instead of its possibilities, the continent will never be an attractive destination for investment capital. Blanket aid causes massive distortions in economies, shifts disproportional attention to unrepresentative issues, constrains the growth of indigenous markets, and trends to unhealthy relationships of dependency.

This is not to say that the Darfur conflict is not an issue worth paying attention to, be it finacially, militarily, or simply via lip-service. Only that the celebrity bandwagoning in the Sudan, Somalia or Malawi casts a long, pessimistic shadow on the entire region.

Of course, there is a counter-argument that without guilty liberal issue-domination stemming from legacies of colonialism and slavery, the West wouldn’t pay much attention to Africa at all.

Given China’s recent interest in the region, I don’t buy that argument. Africa’s important, now and in the future.

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Dropping Knowledge: Stating the Obvious

November 26, 2007 · 1 Comment

oil map of world

One thing I’ve learned studying IR Theory is that most decisions at their core are based on the theory of structural realism. That is to say, at a minimum all states make decisions to ensure their survival, and that states with greater capacities will seek to increase their capabilities (also known as “power maximization”). Great powers constrain each others’ maximization pursuits, resulting in what is known as a “balance of power.”

In today’s world, the key to power is oil. This point tends to get vastly understated in the discussions we have about current affairs. For example:

1. When we talk about the rising cost of oil (which is now flirting with $100 per barrel), we tend to neglect two important facts: first, that the price elasticity of demand for oil is extremely inelastic. That is to say, it doesn’t matter how much oil prices drop or rise, the quantity demanded remains the same. As President Bush said in this years’ State of the Union Address: “Our nation has an oil addiction.” And it’s not just our country, although we’ve got it the worst. It’s a global addiction.

Second, addiction by its very definition implies lack of control. Which brings us back full circle to the original point: whomever controls oil, controls the world. From the perspective of industry, this is because the factors of production of almost every sector include components that are sensitive to oil prices. These price sensitivities can have a direct impact on cost, as in manufacturing, or an indirect impact (via transportation costs), as in technology. And every sector has varying degrees of energy costs. So the more sensitive an industry is to oil prices, the more power whomever controls the oil supply has over that industry.

From the perspective of the consumer, rising oil prices are also felt directly (at the pump and airport), and indirectly, by both a constrained budget set (more money spent on gas means less for movies, clothes, etc.) and by the increased prices for consumer goods (the costs of which are passed along by producers). You know what they call the combination of rising prices, low interests rates, and decreased purchasing power? Inflation.

2. If I lost you above, I shouldn’t have. Go back and read it again. I’m just stating the obvious here. The first point was meant to establish just how important of a position the global control of oil is to whomever can secure it. Take a look at the map above. You see how little oil Europe has? China? The US? India? The less oil a country has, the more it is willing to give up to get oil. The more globally integrated oil is within consumption and factors of production, the more dependent consumers and producers become on oil.

Now take a look at this map. Notice how many US military bases are in the Middle East? You think that’s a coincidence?

3. The logical “next steps” everyone seems to recognize, especially given the environmental considerations of oil, is the pursuit of “alternative” sources of energy. There is of course some game theory to this though. Even if there were a cost-effective substitute for oil (and there most certainly is not, at least yet), the transition costs of adopting that alternative source across sectors would be enormous. And the countries that undertook such an enterprise would be buried by the “cheaters” who continued to use oil (and at an even lesser price due to drop-out of demand). No, oil is a fixed commodity, and unless we find some form of global governance to ration it (highly unlikely), it seems the race is on to squeeze the orange and horde the juice before its all gone in the next 25 years or so.

In the meantime, there is evidence to believe that the financial markets are grossly distorting the price of oil by placing a premium on the political risks associated with its extraction. Based on global supply and demand, it is argued that the price should not be any higher than $60 per barrel. Speculative trading creates a self-fulfilling prophecy, where oil rises to $100 because traders spread unsubstantiated rumors that China and India are insatiable, or Nigeria/Venezuela/Iran are unstable. The consumer ultimately suffers here for the reasons mentioned previously, including inflationary risks, and even risks of recession.

All of this information is extremely relevant when we consider the following foreign policy “debates.”

1.)  Iran and Nuclear Energy– Notice how much oil Iran has?  Notice how much they consume?  It would be economically advantageous if they were to consume nuclear energy and maximize foreign oil sales.  When hawks argue about Iran “obtaining nuclear weapons,” they’re really pushing an agenda that says “Iran holds the potential to leverage and balance the oil oligarchy, and once they obtain nukes we can’t foment a regime change.”

2.)  “Democratizing the Middle East”– The so called “Bush Doctrine” is a fanciful liberal justification for a realist policy.  Oil rich countries really only have two options:  1) illiberal autocracies (Saudi Arabia) or 2.)  illiberal democracies (Venezuela).  The distribution of wealth obtained from a natural resource is complicated in state systems because the citizens of the state feel entitled to the financial windfalls in some form or another.  Elites must either find their power base internally (by implementing fiscally irresponsible, short-term, socialist programs) or externally (by charging rent to the United States in return for a strong military presence or other forms of foreign “aid”).

3.)  Iraq — With the above point in mind, the US objective has become to contain the sectarian violence within the confines of Baghdad.  Let politics play out on a political stage, but keep the pipelines flowing in the fringe regions.  A true power-sharing constitutional government isn’t possible as long as the US is present: because the emergent elites are reliant on the US for security provision, they will never have popular support, and vice versa.  Not to say the US prefers a disorganized central government, only that it benefits from one.  Our presence is justified for as long as there is insecurity.

So that was my Thanksgiving dinner conversation with my parents to justify my expensive Ivy education.  No solutions provided, only a survey analysis.  My stepmother thinks that Hillary will have solutions to these problems.  I introduced her to Mark Penn, the next Karl Rove.  She’s no longer so optimistic.

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Living in America!

November 8, 2007 · 1 Comment

After receiving the results from my Econ midterm (by far the hardest exam I’ve ever taken), I gotta say… thank the good Lord for grade inflation!

America!  Where a 66% is a B+!

I feel GOOD!  It’s a MAN’s world!

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More On: Oil Distortions

November 4, 2007 · Leave a Comment

For those interested in the idea behind rentier states , how difficult governance is in sole-resource economies, and the megalomaniacal appeal of Hugo Chavez, check out this article.  Not exactly well written, but certainly very interesting.  Thanks to Faraj for the heads up.

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Live From Bolivia

October 24, 2007 · Leave a Comment

Reader’s Note: My friend Katie is working on a prolonged water sanitation project in Mizque, Bolivia as part of the Peace Corps. She sent me a wonderful birthday care-package and included a really interesting “day in the life” note that I asked to share on my blog, and she obliged. Really worth the read for four important reasons: 1) to get a snapshot of what the Peace Corps is all about, 2) to gain an appreciation for just how suspect the third world is toward United States foreign policy in Latin America, 3) to gain an appreciation for how democracy works in a small, multi-ethnic, underdeveloped country like Bolivia, and 4) to gain a perspective for the challenges of development work. It’s sweethearts like Katie that make me resent my sometimes cold-hearted professors who call us “modern day missionaries” and describe the world through a pessimistic, “realist” lens.  The contents of this Web site are mine personally and do not reflect any position of the U.S. Government or the Peace Corps.

Dear Jon,

Happy Birthday! Hope you’re celebrating al estilo New York City – though maybe in grad school birthday festivities consist of giving yourself a much needed nap? Well, I hope you treat yourself in some way – and I know I’ll be toasting you with chicha from Mizque!

I had a super interesting/hard day today in Mizque – started writing your b-day note while processing the whole experience and then thought it was just too intense for a nice little update. Long story short, I sat through a long afternoon of reuniones at our town Central Campesina where dirigentes from all over the communities in our municipality were gathered to decide whether our alcalde was cumplir‘ing with his mandate, or whether, midway through his term, he should be kicked out and replaced by someone more “effective” from within his MAS (Evo’s) party.

I showed up to support the mayor 1) because a change midterm would delay all the projects I’m trying to finish this spring and 2) if this mayor goes, so does my AMAZING counterpart, the Jefe de Obras Publicas in the alcaldia, a dude who’s widely recognized within PC to know his shit, especially when it comes to sustainability and the social/community development side of projects — a rarity among Bolivian engineers.

Anyway, it turned into a draining afternoon as different groups presented on the state of the nation/department/town etc., and of course TONS oftime was spent praising the donations and coordination from Venezuela/Cuba/Japan (we also have JICA volunteers in Mizque), and then criticizing America repeatedly for having plans within the CIA to kill indios or for our desire to see Evo kicked out of office (of course in order to prove I didn’t feel the same I felt I had NO option but to sign the petition being passed around to give Evo the next Nobel Peace Prize :) )

So, it was just a frustrating few hours of feeling bashed and isolated among people I typically think of as companeros. I kept getting teary-eyed and walking around outside to esacep all the accusations a bit– and of course every friend/dirigente I chat with NEVER saw the connection between the criticisms and me! The just keep coming up to me and chatting about projects or their kiddos — and when I bring up how awkward I felt during the speeches they remind me how much I know they care for me and cuidar me as a Mizquena, but to think of how badly/isolated Bolivians must feel when THEY go abroad to work and are always treated like poor second-class citizens…

Well, I guess that put me in my place, b/c it really is true — PEOPLE in Mizque couldn’t be more humble, generous and supportive of me and my work, so I need to get over the fact taht I don’t get much recognition publicly b/c of the poor US image.

Development work really is thankless most of the time — and I’m used to being so well supported and loved and thanked in life that leaving all that reassurance to live and work amongst people who maintain pretty steely characters and don’t like your country can be really frustrating. Luckily the work itself is usually its own reward — like seeing kids washing their hands with soap for probably the first time in their lives or teaching my women’s organization how to make a meal that has neither papas nor arroz in it and instead uses lots of colorful veggies and fruits, and the actually LIKE it.

I definitely feel pretty lucky to get to do this work in Bolivia — especially in my 20s when I could be stuck doing clerical work in some office 9-5 back home :) And it’s always validating to read someone like Jeffrey Sachs and check out all the different Millenium Goals that PC work gets to work toward. I agree with the importance of providing basic services and infrastructure ESPECIALLY in sanitation in places like Bolivia where people are so poor and dispersed (this country’s geography really does make development SO DIFFICULT!)

And I like all of Sachs’ ideas on debt relief and more aid and economic reforms within developing countries. What still consistently frustrates me (and I’m not sure if he addresses this at all b/c I’m just halfway through) is how you get people working an a developing country like Bolivia on a well-thought out plan that they can actually follow through on to better their economic situation/daily life. Because, to me, it seems like other countries could donate more $ to places like Bolivia to use to develop their basic services, infrastructure, shitty education system, etc. but if there’s no plan from them on what to do with the newly educated/urban populace (here they mostly become taxi drivers or leave the country to work in Spain/US/Argentina, etc.) or how to keep people from leaving their communities once all those basic service projects are finished (it’s super commonplace to finish a bano/water system project here just as all the most active/good leaders of the community leave to make more money in the city or abroad), then I just don’t see how things will get much better any time soon.

And I really don’t see organized leaders with good plans for moving people out of poverty in meaningful or lasting way in Bolivia — though I do think Evo DOES promote a lot of good efforts like the Cuban “Yo Si Puedo” literacy campaign and the attempts to keep private investment in the country while trying to nationalize some aspects of industry — especially the gas — so that Bolivia isn’t just pillaged of its natural resources as it always has been.

But yeah, like you said — other industries need to be developed for when oil/gas is no longer as pricey of a commodity. And I just don’t see many plans being developed that are working toward long term goals of growing Bolivia on competitive footing to deal with the rest of the world? Well, I hope building rainwater catching tanks makes some difference!

Anyway, I guess my 2nd attempt at a letter today once again isn’t very birthday-esque. Just nice to be able to share some of the frustrating/tough bits of life here with someone who actually cares and is probably up way too late most nights reading and thinking about all these development issues.

XOXO

Katie

P.S.

The majority voted to keep our mayor in office — yay! They were there till 4 am discussing everything, good thing I gave up at dinnertime :)

Cool, huh? Katie’s the best…

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Dropping Knowledge: Rentier States

October 15, 2007 · 2 Comments

“Dropping Knowledge”… where I laymenize an important aspect of social science.

A rentier state is a government that derives all or a significant portion of its national revenue from the rent of its indigenous resources to external clients.  It is a term most commonly applied to oil rich countries (such as Saudi Arabia), which grant access and management of its petroleum deposits to the United States (or the UK, Russia, etc.) in return for a “rent.”

Rentier states are inherently undemocratic.  You see, the geo-political distribution of natural resources makes certain areas extremely profitable, by random chance.  If the states themselves lack the privately developed technology and infrastructure to efficiently extract and distribute their resources, they must (or are otherwise coerced to) outsource such activities.

The thing is, democratic societies detest foreign management of domestic resources (see: Venezuela, Bolivia), and will take steps to “socialize” their industries, directly tax the exports instead of charging rent to foreign entities, and redistribute the wealth domestically, for a much bigger return.  But democratic management of a single resource economy naturally entails a heck of a lot of fighting over “who gets what, and why.”  And government industries are never as efficient as private industries in terms of production, so global trade organizations (OPEC) get antsy when a member state isn’t hitting its productive capacity.

The most efficient governmental arrangement for single-resource economies is therefore the rentier model… small, authoritarian leaderships (Saudi royal family) that placate domestic population by subsidizing EVERYTHING (except, generally, higher education, since educated elites tend to challenge authority).  The tax costs “flow” through the rent charged to Americans for pumping out oil and establishing military bases in the region for security purposes, and no taxes are levied domestically.  The royal family invests the majority of its staggering financial resources back into US securities, which solidifies the dollar and keeps oil demand and prices high.

This brings up a couple important issues:

1)  Some “experts” like to state that Islam is incompatible with democracy.  Bush is actually right when he says this is false (just look at Indonesia).  It’s actually more likely that democracy cannot exist without a diversified economy.  The less access there is to economic opportunity, the less people are involved in the management of the economy.

2)  Democracy is about sovereignty, about the population making decisions based on the Wilsonian principles of self-determination.  If you look at Iraq, you have two major obstacles:  the first is the introduction of a political power struggle between rival populations (Sunni and Shia).  Sunnis are keenly aware of their minority position in Iraq and refuse to participate in a political framework that is illegitimately stacked against their interests.   Shias are a minority within the greater Muslim world and subscribe to a cultural narrative based on resistance to oppression and illegitimate authority.  Even if Shia leadership wanted to achieve stability under the watchful eyes (and guns) of the US, they would continue to be undermined by Iran, which has no interest in seeing a successful secular Shia-dominated democracy as a neighbor, because that would intensify domestic pressures for reform.

The second obstacle to self-determination is that clearly, the preferred interest of Iraqis is American withdrawal, if not now (in the short-term), certainly in the medium- and long-terms.  Iraqis are well aware that the Persian Gulf war resulted in the construction of permanent bases in Saudi Arabia.  And Secretary of Defense Gates has stated publicly that the US “has historically had a strong presence in the region, and we will continue to have a strong presence in the region, and it’s important for our friends, and those who might consider themselves our adversaries, to recognize that.”

The US would prefer for the political outcomes of Iraqi democratic elections to be friendly governments that actively engage in rentier relationships to assuage the masses and ensure their positions of power.   But the Iraqi population will never recognize a pro-US business government as legitimate.  We live in an Age of Information where covert regime changes or puppet governments are really, really hard to achieve.  In the meantime, as instability and civil war rage on in Iraq, the US is quietly consolidating four major bases around the strategic oil regions in the country.

3)  That last point is the most telling.  For all of the gum flapping that goes on about “the principals of liberal democracy” and “freedom,” we tend to get distracted from the realist perspective — that control of Iraq means control over the second largest oil reserve in the world.  Always keep in mind that oil is a finite resource whose price rises with scarcity.  It’s one thing for Saudi Arabia to sell oil at (relatively) competitive prices now… it’s another thing entirely for the US to be rationing the last drops of oil in 20 years, at monopoly prices (don’t forget about Alaska!).  That means the potential for wealth and global power… power over everyone who is addicted to oil… is assured to whomever controls Iraq and the Persian Gulf.

I hate to be the bearer of bad news to some, but that means the business and military pressures are too great on the executive branch of the US government to expect a withdrawal anytime soon, unless Dennis Kucinich and Ron Paul magically win their primaries.  The US army/state department did not spend billions of dollars on bases and the world’s largest embassy to come home any time soon.

4)  With all of this in perspective, it’s important to recognize why Al Gore won the Nobel Peace Prize.  The real “Inconvenient Truth” isn’t necessarily that global warming is a real threat per se… I mean, that was already pretty obvious.  It’s that oil consumption is behind global warming, and that oil demand makes actions like the war in Iraq profitable.  By raising awareness about an ancillary (but still primary concern) of global climate change, Gore is indirectly calling for the necessity to research and develop alternative sources of sustainable energy that would compete with coal, oil and natural gas, making those resources’ price demands more flexible, and reducing the profit incentive of military control and domination of them.  Hence the “Peace” rationale in the Nobel Peace Prize.

The thing is, alternative energy sources are nowhere nearly as profitable as oil, even given the tremendous extraneous costs of financing strategic military bases around the world to protect the investments.  And the transition costs to adopting alternative energy sources would be tremendous in every sector, so oil companies can continue to pass the costs incurred from political instability and deeper, harder to get to reserves (i.e. the melting North Pole) onto the consumers.  I’ve read somewhere that the McKinsey Global Institute did an analysis of gasoline consumption in America, and found that demand wouldn’t significantly falter until the price went past $5.00 per gallon.  (I’m couldn’t find the exact report via a Google search, but hey, it’s midterms… give me a break).

The key of course is then electing leaders who are seriously committed to implementing policies of consumer regulation that prevent us from letting our aggregate demand get the better of us.  Individual conscience in the US is (generally) against empire, against war, against destruction of the environment, against global injustice.  But we speak with our wallets, we make demands through our purchases and consumption, and global suppliers react accordingly, even if the outcomes violate our individual consciences.

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